Tom Moeller

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 Plans to buy consumer durables are rebounding.
The American Research Group, which surveys consumer buying intentions
as well as other issues, indicated that their Furniture Buying Index
rose this month to its highest level since November 2007. The index has
rebounded by one-third from its recession low. During the last fifteen
years there has been a 45% correlation between the y/y change in the
index and the change retail sales at furniture stores

America's Research Group specializes in consumer research, marketing
plans, strategic marketing, strategic planning, and marketing research.
It interviews more than three million American consumers about their
shopping habits.
 In a typical month, 80 percent of the consumers
interviewed can name a specific furniture item they intend to buy. The
Index's mark signifies what percent of the benchmark 80% actually have
a particular item in mind. The data can be found in Haver's
SURVEYS database.

<a href="/comment/100609d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609d.png"></a><a href="/comment/100609e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609e.png"></a>


<table width="100%" cellspacing="0" >
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">America's Research Group</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June
'09
</th><th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Furniture
Buying Index</td>
<td>72</td>
<td>71</td>
<td>69</td>
<td>59</td>
<td>57</td>
<td>60</td>
<td>77</td>
</tr>
</tbody>
</table>

</html>

Plans to buy consumer durables are rebounding. The American Research Group, which surveys consumer buying intentions as well as other issues, indicated that their Furniture Buying Index rose this month to its highest level since [...]

U.S. Furniture Buying Index At Pre-Recession High

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<a href="/comment/100609a_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609a.png"></a> Still in the shadow of the expiration of the
government's housing tax credit, the Mortgage Bankers Association
reported that mortgage applications fell sharply last week reflecting a
collapse in purchase applications. Overall, applications fell 12.2% in
early June from the week earlier.

Applications to purchase a home dropped 5.7% w/w
for the fifth consecutive week of sharp decline. During the last ten
years there has been a 51% correlation between the y/y change in
purchase applications and the change in new plus existing single family
home sales. The correlation has lessened recently. Mortgage refinancings
also fell by 14.3% and reversed increases during the prior two weeks.
 The effective fixed interest rate on conventional
15-year mortgages averaged 4.49% during the latest week, a new cycle
low. For 30-year mortgages the rate also fell to an average 5.01%.
Interest rates on fixed 15-year and 30-year mortgages are closely
correlated (near-90%) with the rate on 10-year Treasury securities.
Rates on adjustable one-year mortgages held roughly steady at
7.01%.&nbsp;
The
Mortgage Bankers Association surveys between 20 to 35 of the top
lenders in the U.S. housing industry to derive its refinance, purchase
and market indexes. The weekly survey covers roughly 50% of all U.S.
residential mortgage applications processed each week by mortgage
banks, commercial banks and thrifts. Visit the Mortgage Bankers
Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The figures for weekly
mortgage applications are available in Haver's SURVEYW
database.
 Economic and financial conditions and
the federal budget is this morning's House testimony by Ben
S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100609a.htm">here</a>.
<a href="/comment/100609b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609b.png"></a>
<a href="/comment/100609c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609c.png"></a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM%22">BA Mortgage Applications (SA,3/16/90=100)</a>
</th><th scope="col">06/04/10</th>
<th scope="col">05/28/10</th>
<th scope="col">05/21/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>560.9</td>
<td>639.0</td>
<td>633.5</td>
<td>-8.2%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">Purchase</td>
<td>167.8</td>
<td>178.0</td>
<td>185.7</td>
<td>-38.0</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Refinancing</td>
<td>2,859.5</td>
<td>3,336.9</td>
<td>3,257.4</td>
<td>9.7</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective Interest Rate (%)</td>
<td>4.49</td>
<td>4.52</td>
<td>4.50</td>
<td>5.21 (06/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>

</html>

Still in the shadow of the expiration of the government's housing tax credit, the Mortgage Bankers Association reported that mortgage applications fell sharply last week reflecting a collapse in purchase applications. Overall, [...]

U.S. Mortgage Applications Collapse

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<a href="/comment/100609a_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609a.png"></a> Still in the shadow of the expiration of the
government's housing tax credit, the Mortgage Bankers Association
reported that mortgage applications fell sharply last week reflecting a
collapse in purchase applications. Overall, applications fell 12.2% in
early June from the week earlier.

Applications to purchase a home dropped 5.7% w/w
for the fifth consecutive week of sharp decline. During the last ten
years there has been a 51% correlation between the y/y change in
purchase applications and the change in new plus existing single family
home sales. The correlation has lessened recently. Mortgage refinancings
also fell by 14.3% and reversed increases during the prior two weeks.
 The effective fixed interest rate on conventional
15-year mortgages averaged 4.49% during the latest week, a new cycle
low. For 30-year mortgages the rate also fell to an average 5.01%.
Interest rates on fixed 15-year and 30-year mortgages are closely
correlated (near-90%) with the rate on 10-year Treasury securities.
Rates on adjustable one-year mortgages held roughly steady at
7.01%.&nbsp;
The
Mortgage Bankers Association surveys between 20 to 35 of the top
lenders in the U.S. housing industry to derive its refinance, purchase
and market indexes. The weekly survey covers roughly 50% of all U.S.
residential mortgage applications processed each week by mortgage
banks, commercial banks and thrifts. Visit the Mortgage Bankers
Association site <a href="http://www.mbaa.org">here</a>.&nbsp;The figures for weekly
mortgage applications are available in Haver's SURVEYW
database.
 Economic and financial conditions and
the federal budget is this morning's House testimony by Ben
S. Bernanke and it can be found <a href="http://www.federalreserve.gov/newsevents/testimony/bernanke20100609a.htm">here</a>.
<a href="/comment/100609b_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609b.png"></a>
<a href="/comment/100609c_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609c.png"></a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/SURVEYW/@S5/@S5.HTM%22">BA Mortgage Applications (SA,3/16/90=100)</a>
</th><th scope="col">06/04/10</th>
<th scope="col">05/28/10</th>
<th scope="col">05/21/10</th>
<th scope="col">Y/Y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr class="odd">
<td class="firstcol">Total Market Index</td>
<td>560.9</td>
<td>639.0</td>
<td>633.5</td>
<td>-8.2%</td>
<td>736.4</td>
<td>642.9</td>
<td>652.6</td>
</tr>
<tr>
<td class="firstcol">Purchase</td>
<td>167.8</td>
<td>178.0</td>
<td>185.7</td>
<td>-38.0</td>
<td>263.5</td>
<td>345.4</td>
<td>424.9</td>
</tr>
<tr class="odd">
<td class="firstcol">Refinancing</td>
<td>2,859.5</td>
<td>3,336.9</td>
<td>3,257.4</td>
<td>9.7</td>
<td>3,509.2</td>
<td>2,394.1</td>
<td>1,997.9</td>
</tr>
<tr>
<td class="firstcol">15-Year Mortgage Effective Interest Rate (%)</td>
<td>4.49</td>
<td>4.52</td>
<td>4.50</td>
<td>5.21 (06/09)</td>
<td>4.85</td>
<td>5.9</td>
<td>6.2</td>
</tr>
</tbody>
</table>
U.S. Furniture Buying Index At Pre-Recession High 
by&nbsp;<a href="/comment/Moeller.html">Tom Moeller</a> June
9, 2010



 Plans to buy consumer durables are rebounding.
The American Research Group, which surveys consumer buying intentions
as well as other issues, indicated that their Furniture Buying Index
rose this month to its highest level since November 2007. The index has
rebounded by one-third from its recession low. During the last fifteen
years there has been a 45% correlation between the y/y change in the
index and the change retail sales at furniture stores

America's Research Group specializes in consumer research, marketing
plans, strategic marketing, strategic planning, and marketing research.
It interviews more than three million American consumers about their
shopping habits.
 In a typical month, 80 percent of the consumers
interviewed can name a specific furniture item they intend to buy. The
Index's mark signifies what percent of the benchmark 80% actually have
a particular item in mind. The data can be found in Haver's
SURVEYS database.

<a href="/comment/100609d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609d.png"></a><a href="/comment/100609e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609e.png"></a>


<table width="100%" cellspacing="0" >
<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead>
<tr>
<th scope="col" class="firstcol">America's Research Group</th>
<th scope="col">June</th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">June
'09
</th><th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Furniture
Buying Index</td>
<td>72</td>
<td>71</td>
<td>69</td>
<td>59</td>
<td>57</td>
<td>60</td>
<td>77</td>
</tr>
</tbody>
</table>
UK Trade Deficit Ceases Progress Toward Lower
Deficits 
by&nbsp;<a href="/comment/Brusca.html">Robert Brusca</a> June
9, 2010


<body>

<a href="/comment/100609f_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100609f.png"></a>
UK exports and imports each backtracked slightly in April after solid
to strong gains in March. The upshot is that the flirtation with
progress in deficit reduction has ground to halt and commenced a
backtracking over the last two months. This backtracking could be
reversed. This episode could be a pause in the process of ongoing
deficit reduction or it could be the start of some real backtracking.
For now it's too soon to tell. So we flash yellow cautionary lights
instead of red ones. 
 For now the trends in the UK data are still
beneficial ones for the prospect of further deficit reduction. Imports
are still growing solidly but steadily with growth rates of 10% to 13%
over various horizons from one-year to 3-months. For exports the growth
rates range from 13% to nearly 40% and the highest growth rates are
more recent ones. That suggests that export growth is still on a strong
track while imports are only steady. One worry of course is that with
the Euro weakened and the German export machine turned on UK exports
could suffer stiffer competition. But the pound has weakened even more
than the euro. Moreover, Germany has done nothing to pump up domestic
demand and the rest of Europe is under a cloud of austerity. Germany
itself is considering further austerity moves. 
 In looking at the UK situation we have three
facts to consider. One is that the trade deficit reduction process has
been under way since that reduction has been somewhat effective. The
second, is that the conditions that made that progress a reality seem
to still be in evidence as export momentum seems stronger than import
momentum over the more recent periods. The pound sterling has fallen in
value, augmenting UK competitiveness even Vs the euro-area. The third
point looks ahead: the macroeconomic facts of life seem to put the UK's
back to the wall. Although it can still do well in exporting to the US
which is growing solidly, the UK trade balance with the EMU group seems
more likely to pose challenges. EMU sends 12% of its exports to the UK.
It's an important market for EMU just as EMU is important to the UK.
Moreover, conditions in EMU will affect the UK. The broad euro real
effective exchange rate (trade-weighted and inflation adjusted) has
gone from being 20% above its estimated parity rate to near parity in
two years' time. There should be repercussions on trade flows from this
in trade with the Zone's key trading partners. But during this period
sterling has fallen sharply even against the Euro. The UK problem in
penetrating the e-Zone will not be price competitiveness but it will be
euro-demand. EMU growth is being stimulated by its trade flows riding
the back of its weak exchange rate, not stimulated from within by
domestic demand. In fact the UK deficit with EU countries widened to
&#163;3.3 billion in April, compared with a deficit of &#163;3.2 billion in
March. Exports rose by &#163;0.1 billion and imports rose by &#163;0.2 billion. A
weak European consumer - even in the Europe's strongest economy,
Germany - is the hurdle faced by UK exporters. Europe simply is not a
strong market even although UK exports can profitably sell there.


<table cellspacing="0" width="100%">
<colgroup><col> <col><col><col><col><col></colgroup>
<thead>
<tr>
<th colspan=6 scope="col">UK
Trade trends for goods</th>
</tr>
<tr>
<th scope="col">&nbsp;
</th><td scope="col" colspan="2">m/m%</td>
<td scope="col" colspan="3">% Saar</td>
</tr></thead><tbody>
<tr class="even">
<td class="firstcol">&nbsp;</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>3M</td>
<td>6M</td>
<td>12M</td>
</tr>
<tr>
<td class="firstcol">Balance*</td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.28 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.26 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
6.94 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
7.15 </td>
<td>- &#163;&nbsp;&nbsp;&nbsp;
6.90 </td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=6>Exports
of Goods</td>
</tr>
<tr>
<td class="firstcol">All
Exp</td>
<td>-0.6%</td>
<td>1.0%</td>
<td>38.9%</td>
<td>13.3%</td>
<td>14.9%</td>
</tr>
<tr>
<td class="firstcol">Capital
gds</td>
<td>-1.3%</td>
<td>1.2%</td>
<td>3.1%</td>
<td>-3.3%</td>
<td>2.8%</td>
</tr>
<tr>
<td class="firstcol">Road
Vehicles</td>
<td>11.5%</td>
<td>-3.2%</td>
<td>59.9%</td>
<td>22.5%</td>
<td>77.3%</td>
</tr>
<tr>
<td class="firstcol">Basic
Materials</td>
<td>-4.3%</td>
<td>18.8%</td>
<td>577.7%</td>
<td>52.5%</td>
<td>35.4%</td>
</tr>
<tr>
<td class="firstcol">Food
Feed Bev &amp; Tbco</td>
<td>-0.5%</td>
<td>1.2%</td>
<td>32.8%</td>
<td>10.6%</td>
<td>5.8%</td>
</tr>
<tr>
<td class="firstcol" >Other
Exports</td>
<td>-1.7%</td>
<td>0.8%</td>
<td>36.3%</td>
<td>14.1%</td>
<td>12.2%</td>
</tr>
<tr class="odd">
<td class="firstcol" colspan=6>Imports
of Goods</td>
</tr>
<tr>
<td class="firstcol">All
IMP</td>
<td>-0.4%</td>
<td>4.3%</td>
<td>12.9%</td>
<td>10.5%</td>
<td>11.6%</td>
</tr>
<tr>
<td class="firstcol">Capital
gds</td>
<td>2.6%</td>
<td>-0.1%</td>
<td>5.5%</td>
<td>15.8%</td>
<td>7.2%</td>
</tr>
<tr>
<td class="firstcol">Road
Vehicles</td>
<td>1.0%</td>
<td>5.1%</td>
<td>23.0%</td>
<td>24.0%</td>
<td>60.0%</td>
</tr>
<tr>
<td class="firstcol">Basic
Materials</td>
<td>-5.7%</td>
<td>6.1%</td>
<td>-4.7%</td>
<td>23.0%</td>
<td>19.7%</td>
</tr>
<tr>
<td class="firstcol">Food
Feed Bev &amp; Tbco</td>
<td>1.9%</td>
<td>1.7%</td>
<td>22.1%</td>
<td>-0.5%</td>
<td>-1.0%</td>
</tr>
<tr>
<td class="firstcol">Other
Imports</td>
<td>-1.3%</td>
<td>5.3%</td>
<td>12.4%</td>
<td>8.9%</td>
<td>9.2%</td>
</tr>
<tr class="grey1">
<td class="firstcol" colspan=6>*Stg
Blns; mo or period average. All
data are
seasonally adjusted</td>
</tr>
</tbody>
</table>
</body></html>

Louise Curley

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<a href="/comment/100608l_big.png" name="modal"><img class="large" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608l.png" align="left"></a>
Japan's seasonally adjusted
current account
balance, reported today, declined 393.5 billion yen from 1,773.1
billion yen in March to 1,379.6 billion yen in April. There has however
been strong uptrend in the balance since the low point of 527.9 billion
yen reached in January 2009.&nbsp; The unseasonally adjusted data
show an 88% increase from 660.6 billion yen in April, 2009 to 1,242.1
billion yen, in April 2010.

Much of the improvement in
the recovery of the
current account balance is due to an increase in the trade
balance.&nbsp; Japanese exports increased 40.4% from April, 2009 to
April, 2010 while imports increased 24.6%.&nbsp; The first two
charts show the year to year percent increases in exports to North
America, mainly the U. S., Western Europe and Asia, mainly China, and
in imports from those same three broad areas.&nbsp; Over the past
five years, Japanese exports to, and imports from imports from, Asia
have generally risen faster than those to North America and Western
Europe.&nbsp; Until&nbsp; late 2008 and early 2009, Japanese
exports to Asia fluctuated between 45 and 51% of total
exports.&nbsp; In mid 2009, exports to Asia began to accelerate and
in March and April of this year, they accounted for more than 56% of
total exports.&nbsp; There was no corresponding jump in the percent
of imports from Asia.&nbsp; The resulting rise in Japan's balance
on trade in goods with Asia has been accompanied by a decline in
Japan's trade surplus with North America as can be seen in the third
chart.

<a href="/comment/100608m_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608m.png"></a>
<a href="/comment/100608n_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608n.png"></a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col">JAPAN</th>
<th scope="col">Apr 10&nbsp;</th>
<th scope="col">Mar 10</th>
<th scope="col">Apr 09</th>
<th scope="col">Y/Y %</th>
<th scope="col">Y/Y Bil Yen Chg</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead><tbody>
<tr>
<td class="firstcol">Current
Account Balance
(SA)&nbsp; (Billion Yen)</td>
<td>1379.6</td>
<td>1773.1</td>
<td>848.8</td>
<td>62.5</td>
<td>530.8</td>
<td>13289</td>
<td>16549</td>
<td>24688</td>
</tr>
<tr>
<td class="firstcol">Current
Account Balance&nbsp;
(NSA)&nbsp; (Billion Yen)</td>
<td>1242.1</td>
<td>2534.2</td>
<td>660.6</td>
<td>88.1</td>
<td>581.5</td>
<td>13287</td>
<td>16380</td>
<td>24794</td>
</tr>
<tr class="odd">
<td colspan=9>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Exports
(Billion Yen)</td>
<td>5887.9</td>
<td>6003.6</td>
<td>4194.9</td>
<td>40.4</td>
<td>1693.2</td>
<td>54171</td>
<td>81018</td>
<td>83931</td>
</tr>
<tr>
<td class="firstcol">North
America&nbsp;</td>
<td>951.9</td>
<td>940.3</td>
<td>708.6</td>
<td>34.3</td>
<td>243.3</td>
<td>9456</td>
<td>15331</td>
<td>18135</td>
</tr>
<tr>
<td class="firstcol">Western
Europe</td>
<td>702.8</td>
<td>683.6</td>
<td>576.8</td>
<td>21.8</td>
<td>126.0</td>
<td>7077</td>
<td>11445</td>
<td>12329</td>
</tr>
<tr>
<td class="firstcol">Asia</td>
<td>3323.5</td>
<td>3380.4</td>
<td>2287.9</td>
<td>45.2</td>
<td>1036.6</td>
<td>29333</td>
<td>39966</td>
<td>40401</td>
</tr>
<tr class="odd">
<td colspan=9>&nbsp;</td>
</tr>
<tr>
<td class="firstcol">Imports
(Billion Yen)</td>
<td>5147.4</td>
<td>5053.7</td>
<td>4145.7</td>
<td>24.6</td>
<td>1001.6</td>
<td>51499</td>
<td>78955</td>
<td>73136</td>
</tr>
<tr>
<td class="firstcol">North
America&nbsp;</td>
<td>573.4</td>
<td>606.0</td>
<td>534.8</td>
<td>7.21</td>
<td>38.6</td>
<td>6378</td>
<td>9371</td>
<td>9530</td>
</tr>
<tr>
<td class="firstcol">Western
Europe</td>
<td>493.3</td>
<td>590.0</td>
<td>475.5</td>
<td>3.75</td>
<td>17.8</td>
<td>6137</td>
<td>7999</td>
<td>8299</td>
</tr>
<tr>
<td class="firstcol">Asia</td>
<td>2353.9</td>
<td>2203.6</td>
<td>1915.5</td>
<td>22.9</td>
<td>43.8</td>
<td>22989</td>
<td>32034</td>
<td>31564</td>
</tr>
</tbody>
</table>

</html>

Japan's seasonally adjusted current account balance, reported today, declined 393.5 billion yen from 1,773.1 billion yen in March to 1,379.6 billion yen in April. There has however been strong uptrend in the balance since the low [...]

Japan's Current Account Balance And Trade In Goods

Robert Brusca

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<a href="/comment/100608k_big.png" name="modal"><img src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608k.png" class="large" align="left"> </a>
IP over board!
That's right IP is brimming over with growth. German IP is up sharply
in April and it is a race with the IP from Italy- of all places. So
this raises a question: how many European optimists can you fit in one
of those picturesque, red British Telecom phone booths? Answer- all of
them! ...that is if you can find any at all. 

Phone
booths? Who care about a phone booth except Clark Kent? I
know what you are thinking, in an age of cell phones (or mobiles if you
are a Brit) who gives a ding-dong about phone booths? But there you go
again changing the subject. No one wants to talk about optimism.
Everything right now is about pessimism and that is the point. So lets
dot he unthinkable and talk about the empty phone booth. 
 The
end of pessimism is not like waiting for the end of days-
There is in fact no better time to talk about optimism but when things
are so dark and bleak. It's sort of like horror film. You don't need to
have seen 'it' to 'know' what's going to happen, you just need to know
how long the movie is going to be and to pick you spot... No matter how
grisly and unwatchable the movie, in the last 10-15 minutes, the worm
will turn and someone will somehow vanquish the killer vampire, the bug
from outer space or the depraved sadist psycho-killer or whatever. The
difference is that in markets we don't know exactly when it will end.
Bear markets don't come with a time-stamp. We do know that the bear
market will end, for stocks, for the euro, and so on. Everything ends
(well maybe not the oil leak in the Gulf of Mexico- note that the NY
Times, the custodian of language, calls it a 'leak', not a gusher).

Description
as reality - So that raises another point, and that is
that things often become what they are described to be, making the
metamorphosis from what they really are. 
 Man
bites dog is no story; stocks fall forever is a GREAT story
- And, to come full circle, that is sort of why everyone is so
pessimistic. Everyone has a thousand reasons why things are so bad.
It's good to remember that there is a circle of securities trading that
revolves around the evolution of economic data and news. And even the
most basic trader knows that news makes money and if you can get out in
front of the news, that's the safest place to be. Any way that a trader
can manipulate the news can help him (or her) to make money. So there
is no lack of traders trying to feed the beast with stories of how bad
it is or how bad it is going to be, in order to extend the trend and
keep the trading environment 'safe;' safe for traders at least. We have
visited this subject before.

Phases of the market and the moon and the milky way -
Markets have up-phases and down-phases and right now we are in a
down-phase, for stocks and the euro and up-phase for gold; oil is not
quite sure what it is doing it is just plain 'phased out'. I will
remind you that there are accumulation and distribution phases to
market trading and if ever there was a distribution phase this is one.
Stocks have been sold to extremes the euro has been sold to an extreme
and the all the easy money has been made. Whatever moves are left to
these current trends they will reap profits for those who already have
the positions passing the riskier trades onto the Johnny-come-lately
investor. Don't let that be you. So Johnny don't come late, just go
quietly. There is no sense in getting short by trying to make money
over already-been-spilled-milk.

Reality
bites ...back - Economic forecasts for Switzerland today
were just lifted. German data are looking good. Yes Spain can be added
to the list of countries undertaking austerity with public sector
blow-back. But what profession takes pay cuts sitting down? Not
firemen! Not policeman! Not teachers! Not Wall Street! OK point made.
Blowback is part of the process, it's NOT NEWS!

Fairy
tales can come true, but what if they do? - Meanwhile the
underlying disturbing development everyone is watching with
baited-breath is Germany's early move to adopt some austerity. How
risky is this after all? On the face of it this seems a little bit like
a fairy tale in which the king that likes the goose's golden eggs so
much he wonders what its flesh tastes like. Germany should not go there
and disrupt the golden egg of growth by messing with fiscal policy. But
even if it does, it's far from clear to me that it would do enough
damage to seriously disrupt the recovery that is in process. That's
right Germany's flirtation with austerity is another red-herring for
weak growth. 

Achtung
baby... NEWS FLASH!! German growth does not depend on German
demand! In Germany, the recovery is substantially about exploiting
FOREIGN DEMAND. Yr/Yr capital goods output is up by 14% intermediate
goods output is up by 21%. The output of consumer goods is up by 1%-
yes that also is Year over year. How much more damage to that +1% Yr/Yr
growth can Germany do? Oh, and over three months German consumer goods
consumption is falling at 5.8% annual rate while overall IP is rising
at a 21% annual rate. So do we even care about the German consumer?
Achtung baby, but none for the German consumer. 
 What
Germany wants, what Germany needs - The issue in Germany
is that it 'is needed' to promote domestic consumption but that it
'needs' to do this for the rest of the world not for itself. But
Germany 'wants' to attain more fiscal discipline so it will throw the
consumer under the bus and that will not affect German export growth.
But it could make for a good horror movie called "Schnell II' starring
Keanu Reeves and Sandra Bullock as unwilling runaway bus drivers.
Whether domestic private consumption lags or contracts in Germany does
not seem to matter much; the consumer seems destined to be a footnote
in Germany's expansion which for Germany will press ahead on export-led
growth fueled by a weak euro. This fiscal tact, of course, is a very
selfish act by Angela Merkel who has problems of her own. As for any
politician, self preservation is job-one. But let's also remember that
killing off growth never did any politician any good (you can think
about eating the goose and talk about it, but actually eating it is
something else). What Merkel needs is the appearance of fiscal
consolidation much more than severe fiscal consolidation. .So keep that
thought active, as the pessimists swirl overhead sucking the very life
out of optimism like the death eaters circling and closing in over the
inert body of Harry Potter. Not to spoil the movie, but Harry did
escape. 
 Not
as bad as it seems - Put Europe in perspective. Growth is
actually much better than people give it credit for. The downside risks
are not a big as they seem when you factor in the politics of the
situation (politicians need to seem to be people of action more than
they need to be people of action except in a real crisis -which this is
not). And pessimism has the bit in its teeth and is running wild,
completely out of control. If Diogenes were alive today he could go
hunting for an honest-optimist in Europe, but he clearly would run out
of oil for his lamp before he would find one. Few in the financial
markets ever give you an honest opinion and fewer still are optimists.
Diogenes would be looking for a needle in a field of haystacks. In the
markets everyone has a trading position and that gets in the way of a
good honest opinion every single time. So the best approach always is
to think for yourself. Read the papers and be skeptical. Ask yourself,
"does what is going on the market make any sense?" That is always a
good place to start. Joining a rally or sell off you don't really
understand is one of the most dangerous things you can do. 

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th colspan="8" scope="col">Total
German IP</th>
</tr>
</thead><tbody>
<tr class="even">
<td class="firstcol">Saar
exept m/m</td>
<td>Apr-10</td>
<td>Mar-10</td>
<td>Feb-10</td>
<td>3-mo</td>
<td>6-mo</td>
<td>12-mo</td>
<td>Quarter-to-Date</td>
</tr>
<tr>
<td class="firstcol">IP
total</td>
<td>0.9%</td>
<td>4.3%</td>
<td>-0.2%</td>
<td>21.6%</td>
<td>10.0%</td>
<td>13.2%</td>
<td>24.2%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Consumer</td>
<td>-1.2%</td>
<td>2.0%</td>
<td>-2.3%</td>
<td>-5.8%</td>
<td>2.5%</td>
<td>1.0%</td>
<td>-3.8%</td>
</tr>
<tr>
<td class="firstcol">&nbsp;Capital</td>
<td>-1.0%</td>
<td>5.3%</td>
<td>1.2%</td>
<td>23.8%</td>
<td>9.6%</td>
<td>14.1%</td>
<td>18.1%</td>
</tr>
<tr class="odd">
<td class="firstcol">&nbsp;Intermed</td>
<td>2.8%</td>
<td>3.8%</td>
<td>-0.1%</td>
<td>29.1%</td>
<td>14.6%</td>
<td>21.1%</td>
<td>36.7%</td>
</tr>
<tr>
<td colspan="8" class="firstcol">Memo</td>
</tr>
<tr class="odd">
<td class="firstcol">Construction</td>
<td>2.6%</td>
<td>24.4%</td>
<td>0.0%</td>
<td>166.0%</td>
<td>16.6%</td>
<td>5.1%</td>
<td>171.3%</td>
</tr>
<tr>
<td class="firstcol">MFG
IP</td>
<td>0.6%</td>
<td>3.9%</td>
<td>0.0%</td>
<td>19.2%</td>
<td>9.9%</td>
<td>14.1%</td>
<td>20.5%</td>
</tr>
<tr class="odd">
<td class="firstcol">MFG
Orders</td>
<td>2.8%</td>
<td>5.1%</td>
<td>0.0</td>
<td>36.7%</td>
<td>32.2%</td>
<td>29.8%</td>
<td>44.3%</td>
</tr>
</tbody>
</table>

</body></html>

IP over board! That's right IP is brimming over with growth. German IP is up sharply in April and it is a race with the IP from Italy- of all places. So this raises a question: how many European optimists can you fit in one of those [...]

German IP Continues To Press Ahead In The Face Of Growth Pessimism The Dire Straights Of Europe And Other Fairy [...]

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<a href="/comment/100608i_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608i.png"></a>
<a href="/comment/100608j_big.png" name="modal"><img class="small" height: px src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608j.png"></a>

Consumers continued to hold their breath after
their late-April shopping spree. Chain store sales last week rose just
modestly but roughly equaled the May average. In turn, they were down
from the April high. However, versus late-February sales broke from the
earlier malaise and rose 3.6%.
During the last ten years there has
been a 68% correlation between the y/y change in chain store sales and
the change in retail sales at general merchandise stores. That correlation recently
has increased.
The ICSC-Goldman Sachs retail
chain-store sales index is constructed using the same-store sales
(stores open for one year) reported by 78 stores of seven retailers:
Dayton Hudson, Federated, Kmart, May, J.C. Penney, Sears and Wal-Mart. During the last ten years
there has been a 69% correlation between the year-to-year growth in
chain store sales and the growth in general merchandise retail sales. The weekly figures are
available in Haver's SURVEYW database.
The leading indicator of chain store sales
continued to move sideways. During all of May it equaled April but was
at the high end of the range in place since the middle of last year.
Nevertheless, stability in the index compares to roughly 6% y/y
declines late in 2008. The composite leading economic indicator is
compiled from four series: (1) the MBA's volume index of mortgage
applications for home purchase (2) the ABC News/Money magazine's survey
of consumer buying conditions (3) new filings for jobless benefits and
(4) the 30-year government bond yield.&nbsp;


<colgroup><col><col><col><col><col><col><col><col></colgroup>
<thead><tr>
<th scope="col" class="firstcol"><a href="http://www.haverselect.com/dlx/surveyw/@S2/@S2.HTM" ;="">ICSC-UBS (SA, 1977=100)</a>
</th><th scope="col">06/05/10</th>
<th scope="col">05/29/10</th>
<th scope="col">05/22/10</th>
<th scope="col">y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr></thead>
<tr>
<td class="firstcol">Total Weekly Chain Store Sales</td>
<td>503.5</td>
<td>499.7</td>
<td>496.7</td>
<td>3.1%</td>
<td>0.1%</td>
<td>1.4%</td>
<td>2.8%</td>
</tr>



</html>

Consumers continued to hold their breath after their late-April shopping spree. Chain store sales last week rose just modestly but roughly equaled the May average. In turn, they were down from the April high. However, versus late- [...]

U.S. Weekly Chain Store Sales' Improvement Volatile But Real

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<a href="/comment/100608f_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608f.png"></a> 
U.S. gasoline prices are down from their recent
high, but the decline seems to be loosing momentum. The pump price of regular
gasoline held steady last week at $2.73 per gallon prices
and prices remained up more than three-quarters since the December 2008
low. Yesterday the spot market price for a gallon of regular gasoline
also held roughly steady with last week's average of $1.94 which was up
from the prior two weeks' average. The figures are reported by the U.S.
Department of Energy and can be found in Haver's WEEKLY
&amp; DAILY databases.


The
average price for a barrel of light sweet crude (WTI) rose last week to
$72.89 but remained down from the high of $84.23 averaged during April.
Yesterday, crude prices slipped with Friday's weak U.S. employment
report but at $71.44 per barrel were up from the May 24th low of $66.88.

Demand
for gasoline seems to be slipping with higher prices. It fell
0.5% last week versus one year ago but that compares to a 3.0% decline
in early-February. The demand for residual fuel oil jumped 32.0%% and
distillate demand also surged 11.7% y/y. That's improved from a 12.3%
decline during February. Inventories of crude oil and petroleum
products slipped in late-May but still were up sharply from the early
2010 low.

U.S.
natural gas prices strengthened further last
week to an average $4.46 per mmbtu (17.5% y/y). Nevertheless, prices
remained down from a high of $6.50 early in January.

The
energy price data can be found in Haver's WEEKLY database
while the daily figures are in DAILY. The gasoline
demand figures are in OILWKLY.
<a href="/comment/100608g_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608g.png"></a>
<a href="/comment/100608h_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608h.png"></a>

<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol">
<a href="http://www.haverselect.com/dlx/WEEKLY/@W4/@W4.HTM" ;="">Weekly
Prices</a></th>
<th scope="col">06/07/10</th>
<th scope="col">05/31/10</th>
<th scope="col">05/24/10</th>
<th scope="col">y/y</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead><tbody>
<tr class="odd">
<td class="firstcol">Retail
Regular Gasoline ($ per Gallon, Regular)</td>
<td>2.73</td>
<td>2.73</td>
<td>2.79</td>
<td>3.8%</td>
<td>2.35</td>
<td>3.25</td>
<td>2.80</td>
</tr>
<tr>
<td class="firstcol">Light Sweet Crude Oil,
WTI&nbsp; ($ per bbl.)</td>
<td>72.89</td>
<td>71.13</td>
<td>69.02</td>
<td>7.0%</td>
<td>61.39</td>
<td>100.16</td>
<td>72.25</td>
</tr>
<tr class="odd">
<td class="firstcol">Natural
Gas Price ($/mmbtu)</td>
<td>4.46</td>
<td>4.18</td>
<td>4.25</td>
<td>17.5%</td>
<td>3.95</td>
<td>8.88</td>
<td>6.97</td>
</tr>
</tbody>
</table>

</body></html>

U.S. gasoline prices are down from their recent high, but the decline seems to be loosing momentum. The pump price of regular gasoline held steady last week at $2.73 per gallon prices and prices remained up more than three-quarters [...]

U.S. Gasoline Price Decline Stabilizes

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<a href="/comment/100608c_big.png" name="modal"><img class="large" align="left" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608c.png"></a>
Small businesses are joining in with the broader improvement in the economy. The National
Federation of Independent Business (NFIB) reported their May small
business optimism index rose m/m to 92.2. It remained the highest level
since September 2008. During the last ten years there has been an 85%
correlation between the level of the NFIB index and the two-quarter
change in real GDP.
The
lift came as an increased percentage of firms expected the economy to
improve with higher sales and (much) higher earnings. Firms also
expected to add to inventories for the first time since late-2007.

Hiring plans have improved. The percentage of firms with one or more
job openings slipped m/m but the percentage planning to lift employment
was positive for the first time since September 2008. During the last
ten years there has been a 74% correlation between the NFIB employment
index and the six-month change in nonfarm payrolls.

Pricing activity improved. The percentage of firms planning
to raise prices rose to its highest level since late-2008. The
percentage of firms actually raising prices slipped
to -15% (indicating deflation).&nbsp;Finally, the percentage
planning to raise worker compensation slipped m/m to 4% though that was
improved from none in March 2009. During the last ten years there has
been a 51% correlation between the six-month change in the producer
price index and the level of the NFIB price index.
The
most important problems seen by business were poor sales (30%), taxes
(22%), government requirements (13%), insurance cost &amp;
availability (9%), competition from large businesses (6%) and inflation
(4%).
About
24 million small businesses exist
in the United States. Small business creates 80% of all new jobs in
America and the NFIB figures can be found in Haver's SURVEYS
database.&nbsp;
<a href="/comment/100608d_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608d.png"></a>
<a href="/comment/100608e_big.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/100608e.png"></a>
<table border="0" cellspacing="0" width="100%">
<colgroup><col><col><col><col><col><col><col></colgroup><thead><tr>
<th scope="col" class="firstcol">
<a href="http://www.haverselect.com/dlx/SURVEYS/@S7/@S7.HTM">Nat'l
Federation of Independent Business</a></th>
<th scope="col">May</th>
<th scope="col">April</th>
<th scope="col">March</th>
<th scope="col">May '09</th>
<th scope="col">2009</th>
<th scope="col">2008</th>
<th scope="col">2007</th>
</tr>
</thead><tbody>
<tr>
<td class="firstcol">Small
Business Optimism Index
(SA, 1986=100)</td>
<td>92.2</td>
<td>90.6</td>
<td>86.8</td>
<td>88.9</td>
<td>86.7</td>
<td>89.8</td>
<td>96.7</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent of Firms Expecting
Economy To Improve
</td>
<td>8 </td>
<td>&nbsp;0</td>
<td>-8</td>
<td>12</td>
<td>-0</td>
<td>-10</td>
<td>-4</td>
</tr>
<tr>
<td class="firstcol">Percent
of Firms With One or More Job Openings
</td>
<td>9</td>
<td>11</td>
<td>9</td>
<td>9</td>
<td>9</td>
<td>18</td>
<td>24</td>
</tr>
<tr class="odd">
<td class="firstcol">Percent
of Firms Reporting That Credit Was Harder To Get</td>
<td>13</td>
<td>14</td>
<td>15</td>
<td>16</td>
<td>14</td>
<td>9</td>
<td>6</td>
</tr>
<tr>
<td class="firstcol">Percent of Firms Raising Avg.
Selling Prices (Net)
</td>
<td>-15</td>
<td>-11</td>
<td>-20</td>
<td>-22</td>
<td>-20</td>
<td>17</td>
<td>15</td>
</tr>
</tbody>
</table>

</body></html>

Small businesses are joining in with the broader improvement in the economy. The National Federation of Independent Business (NFIB) reported their May small business optimism index rose m/m to 92.2. It remained the highest level since [...]

U.S. Small Business Optimism Continues To Improve Sharply

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Nonfarm payrolls increased 177,000 (1.2% y/y) during April after rising 185,000 in March, revised from 228,000, and 102,000 in February, revised from 117,000. Expectations had been for a 130,000 rise in the Action Economics Forecast Survey. The latest figure left the three-month average change at 155,000 in April, down from 232,000 in January.

Average hourly earnings rose 0.2% during April after unrevised increases of 0.3% in March and 0.2% in February. Earnings growth of 3.8% y/y was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, held m/m at an expected 4.2% in April, and compared to 4.1% in February and 4.0% in January. It reached a low of 3.4% in April 2023. The unemployment rate, including employees working part-time for economic reasons plus all marginally-attached workers, eased to 7.8% in April from 7.9% in March.

In the **establishment survey**, private-sector employment rose 167,000 (1.2% y/y) after a 170,000 March increase. Factory sector jobs edged 1,000 lower (-0.7% y/y) following a 3,000 gain. Construction sector employment increased 11,000 (1.7% y/y), after rising 7,000 in March.

Private service-producing sector employment increased 156,000 (1.4% y/y) in April after improving 161,000 in March. Increases varied greatly amongst service sector categories. Private education & health sector employment rose 70,000 (3.4% y/y) last month following a 74,000 March increase. Leisure & hospitality employment rose 24,000 (1.3% y/y) after a 38,000 gain. Trade, transportation & utilities rose 32,000 (0.9% y/y) in April following a 25,000 March increase. Professional & business services employment rose 17,000 (-0.1% y/y) following a 3,000 rise while temporary help employment rose 3,600 (-3.9% y/y) following a 2,700 decline. Financial activities employment improved 14,000 (1.2% y/y) after a 6,000 gain. The number of information sector jobs held steady (-0.4% y/y) last month after falling 2,000 in March.

Government sector payrolls rose 10,000 (1.3% y/y) last month after increasing 15,000 in March. The number of local government jobs increased 13,000 (1.4% y/y) following a 17,000 gain. State government employment rose 6,000 (1.8% y/y) following a 2,000 March increase but federal government payrolls fell 9,000 (-0.3% y/y), the third consecutive monthly decline.

Private-sector average hourly earnings rose 0.2% (3.8% y/y) in April after increasing 0.3% in March. Earnings in the goods-producing sector eased 0.1% (+4.0% y/y) following a 0.6% gain. Earnings in construction rose 0.3% (3.6% y/y), after a 0.2% rise but factory sector earnings declined 0.3% (+4.3% y/y) after surging 0.8% in March. In the private services-sector, earnings rose 0.2% (3.7% y/y) in April for the third straight month. Information sector pay increased 1.0% (5.2% y/y) last month after easing 0.1%, and financial activities earnings rose 0.5% (4.3% y/y) for the second straight month. Trade, transportation & utilities sector pay increased 0.4% (3.4% y/y) after 0.6%. Professional & business sector earnings increased 0.1% (4.4% y/y) after 0.2% in March. Leisure & hospitality earnings held steady (+3.8% y/y) following a 0.6% March increase.

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The length of the average workweek held steady at 34.3 hours in April. The workweek in the goods-producing sector eased to 39.8 hours from 40.0 hours. The construction sector average workweek eased to 39.0 hours from 39.3 hours while the factory sector workweek moved lower to 40.0 hours from 40.2. The average workweek in the private service sector held at 33.2 hours. Professional & business service hours fell to 36.3 hours from 36.4 while trade, transportation & utilities hours improved to 34.3 from 34.0 hours. Private education hours rose slightly to 32.8, but leisure & hospitality held steady at 25.5 hours.

In the **household survey**, the unemployment rate held at 4.2% in April as employment rose 436,000 and the size of the labor force increased 518,000. The labor force participation rate edged up to 62.6% last month from 62.5% in March. It remained below the high of 63.3% early in 2020. The rate for teenagers declined to 36.9%. For workers aged 20-24, the rate held steady at 72.1%, up from 71.8% six months earlier. For workers aged 25-54 the rate rose to 83.6%, a five-month high. For individuals 55 and over, the rate improved to 38.4% in April.

The employment/population ratio for all workers in April rose to 60.0%. It remained below the peak reading of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's **USECON** database. Detailed figures are in the **EMPL** and **LABOR** databases. The expectations figures are in the **AS1REPNA** database.

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- Job growth spreads across most sectors.
- Earnings growth trend decelerates.
- Jobless rate holds steady.

U.S. Job Growth Is Firm in April but March Gain Is Lessened

Winnie Tapasanun

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Total factory orders rose a slightly less-than-expected 4.3% m/m in March after rises of 0.5% in February and 1.8% in January, data from the U.S. Census Bureau showed. A 4.5% m/m March increase had been expected in the Action Economics Forecast Survey. The March reading was the third successive monthly rise and the largest since July 2024. The year-on-year rate accelerated to 6.0% in March, the highest since November 2022, from 2.3% in February. Notably, orders for nondefense aircraft & parts soared 139.0% in March following a 7.4% drop in February and a 92.9% surge in January. Factory orders excluding defense rose 4.8% (5.9% y/y), the largest of three straight m/m/ rises, after a 0.4% February increase. Factory orders excluding the transportation sector fell 0.2% (+1.1% y/y), the first m/m fall since August, after rising 0.3% in February, January and December.

Durable goods orders jumped 9.2% (11.9% y/y) in March, the third consecutive m/m gain and the biggest since July 2024, on top of a 0.8% increase in February (matching +9.2% m/m in the advance report on April 24). The March jump reflected m/m orders increases of 27.1% (the largest m/m surge since July 2024; 31.2% y/y) in transportation equipment, 1.1% (4.9% y/y) in primary metals, 0.5% (-0.4% y/y) in furniture & related products, 0.1% (2.5% y/y) in fabricated metal products, and 0.1% (0.9% y/y) in machinery. To the downside, durable goods orders for computers & electronic products (-1.3%; +2.7% y/y) and electrical equipment, appliances & components (-1.0%; +4.2% y/y) declined m/m in March.

Nondurable goods orders, which equal nondurable goods shipments, fell 0.3% (+0.4% y/y) in March, the first m/m fall since September, after a 0.1% uptick in February. The March fall reflected m/m drops of 2.4% (-9.3% y/y) in petroleum & coal products and 0.9% (-1.2% y/y) in apparel. To the upside, the following nondurable goods shipments rose m/m in March: leather & allied products (1.5%; 8.6% y/y), beverage & tobacco products (0.7%; 5.8% y/y), paper products (0.6%; 2.3% y/y), printing (0.3%; 3.8% y/y), textile mills (0.3%; 0.8% y/y), chemical products (0.2%; 5.4% y/y), plastics & rubber products (0.2%; 0.4% y/y), food products (0.1%; 1.8% y/y), and textile products (0.1%; 2.1% y/y).

Total shipments slipped 0.1% (+2.0% y/y) in March, the first m/m easing since October, after a 0.7% increase in February. Excluding transportation, shipments were virtually unchanged m/m (+1.1% y/y) in March following six straight m/m gains. Shipments of durable goods industries inched up 0.1% (3.8% y/y) in March, the smallest of four consecutive m/m increases, after a 1.3% advance in February. This reflected m/m durable goods shipments rises of 1.2% (5.6% y/y) in primary metals, 0.9% (0.1% y/y) in furniture & related products, 0.8% (-0.2% y/y) in nonmetallic mineral products, 0.4% (0.0% y/y) in machinery, 0.3% (1.8% y/y) in fabricated metal products, 0.2% (4.5% y/y) in computers & electronic products, 0.2% (-2.1% y/y) in wood products, and 0.1% (3.0% y/y) in electrical equipment, appliances & components. In contrast, durable goods shipments for transportation equipment (-0.5%; +7.3% y/y) and miscellaneous durable goods (-0.1%; +2.9% y/y) fell m/m in March following three successive m/m increases.

Unfilled orders rose 2.0% (2.3% y/y) in March, up for the eighth month in nine, after a 0.1% uptick in February. Excluding transportation, unfilled orders dipped 0.1% (+0.7% y/y) in March, the first m/m easing since May 2024, after holding steady in February. Backlogs of durable goods rose 2.0% (2.3% y/y) in March, reflecting m/m rises of 3.1% (3.1% y/y) in transportation equipment and 0.2% (2.4% y/y) in electrical equipment, appliances & components.

Inventories edged up 0.1% (0.9% y/y) in March, the fifth straight m/m increase, after rising at the same pace in the prior two months. Excluding transportation, inventories were up 0.1% (0.5% y/y) in March, the fifth consecutive m/m rise. Durable goods inventories ticked up 0.1% (1.0% y/y) in March after holding steady in February and January; nondurable goods inventories edged up 0.1% (0.8% y/y), the fifth successive m/m increase.

The factory sector data are available in Haver’s **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- March manufacturers’ new orders +4.3% m/m; +6.0% y/y, highest since Nov. ’22.
- Durable goods orders (+9.2%) jump m/m, while nondurable goods orders (-0.3%) and shipments (-0.1%) decline m/m.
- Transportation equipt. orders +27.1% m/m, w/ a 139.0% m/m surge in nondefense aircraft & parts orders.
- Unfilled orders +2.0%, the eighth m/m rise in nine months.
- Inventories +0.1%, the fifth consecutive m/m increase.

U.S. Factory Orders Increase for the Third Straight Month in March

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The global manufacturing data showed broad weakening in April as conditions weakened across more than half of the contributing early reporters in the S&P survey of manufacturing. Of the 18 early reporting countries, more than half of them showed deceleration over six months and 12 months. Over three months, only 8 of 18 showed deterioration and that's about as good as it got in this report. In the current month, month-to-month changes showed more than half of the survey contributors showing weaker results than the month before. In the S&P framework, manufacturing improved month-to-month for the U.S.; however, looking at sequential averages for the U.S., U.K., European monetary union, Canada, and Japan, we see a steady weakening and results over 12 months, over six months versus 12 months, and for three months versus 6 months. The highly developed countries are not doing particularly well.

Asian economies are also showing slight deterioration but doing a little better than the developed countries in general.

Only five of the 18 reporting countries have queue percentile standings in their data back to January 2021 that are above their medians. Readings at or above the 50% mark are at or above the median standing. Canada is showing the weakest manufacturing result on record over this span, in terms of its queue percentile standing which is at 0 in the current month.

I showed the graphic for the Baltic dry goods index in this report rather than statistics on the manufacturing PMI data because the Baltic data, which reflect shipping volume for dry goods - that is excluding things like oil - is weak but it's only in the neighborhood where it's been for some time. There has been a great deal of talk about how tariffs may have impacted trade flows, expected trade flows, shipping, shipping rates, and the like. However, according to the Baltic dry goods index, there isn't much evidence that this is occurring right now and affecting the current data. That may still lie ahead but for now it's not baked in the cake.

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Globally Manufacturing Weakens

Andrew Cates

**China-US shipping activity** 
The economic fallout from escalating US-China trade tensions is becoming increasingly visible in the data. A clear example is the chart below, which highlights a sharp drop in vessel arrivals at the ports of Los Angeles and Long Beach, along with a notable decline in ships waiting offshore. These trends point to a tangible weakening in bilateral trade flows, as the effects of tit-for-tat tariffs imposed by both countries begin to bite. Given the outsized role the US and China play in global commerce, this slowdown is likely to reverberate through global supply chains, weighing on trade volumes, dampening demand, and curbing economic growth worldwide.

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**GDP growth in Q1**
Data this week showed that the US economy contracted, albeit modestly, in Q1 even as the euro area recorded a modest expansion—an unusual divergence. The contraction in US GDP can be largely attributed to a sharp increase in imports, as firms rushed to front-load purchases ahead of anticipated tariff hikes. In addition, domestic demand was subdued, with weaker contributions from both consumer spending and government consumption. This decoupling between the US and euro area economies is particularly striking given the current global focus on the US dollar. While the euro area has shown unexpected signs of resilience, the US downturn raises important questions about its underlying momentum, especially as trade dynamics and policy uncertainty continue to cloud the outlook.

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**The US dollar versus yield differentials**
Chart 3 below illustrates a sharp breakdown in the correlation between the US-Germany 10-year yield differential and the EUR/USD exchange rate. Historically, the dollar has moved closely with interest rate spreads, as yield-seeking capital flowed into US assets. But since early 2025—and more acutely following the April tariff actions—the dollar has weakened markedly even as the yield spread has narrowed only modestly. This decoupling underscores a critical shift: capital markets are reacting not just to monetary policy, but to rising trade and geopolitical uncertainty. In other words, the exchange rate is now being driven as much by risk sentiment as by interest rate arbitrage.

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**The US economy’s structural outperformance and the dollar**
A second dynamic, captured in the next chart, reveals a tight correlation between the US real effective exchange rate and the potential GDP growth differential between the US and euro area over the past 50-60 years. This raises the question: has dollar strength (until recently) merely been a reflection of US growth leadership—or are capital inflows themselves helping to sustain this growth outperformance? In effect, the tail may be wagging the dog. Global investors have long allocated capital to the US, attracted by its macroeconomic resilience, technological leadership, and deep, liquid financial markets. The danger now is that the US trade war may disrupt this equilibrium. A sharp or sustained reduction in capital inflows could undermine growth, weaken the dollar, and trigger broader financial instability. Moreover, reversing this dynamic is not straightforward—barring a credible structural resurgence in European (or Asian) growth, the global investment landscape remains tilted toward the US.

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**US competitiveness versus Europe, China and Japan** 
The next chart below examines relative unit labour costs across major economies since 2011. The US and China have seen a broadly similar trajectory, with steady increases in relative cost structures, while the euro area has remained flat and Japan has seen dramatic improvement. This suggests that, from a cost competitiveness standpoint, the US is not uniquely disadvantaged vis-à-vis China. However, as we discuss further below, this parallel erosion of cost competitiveness is occurring at much higher nominal wage levels in the US, which blunts its ability to regain export share through tariff-related shifts alone. The trade war strategy—absent a corresponding improvement in productivity or structural reforms—risks imposing costs without delivering material competitiveness gains.

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**Average wages in selected developed and developing economies**
This point is reinforced by the final chart, which shows estimates for average monthly wages across countries in 2024. US labour remains much more expensive than in peer or emerging economies. So even if China’s costs rise in tandem with the US, the global supply chain has ample alternatives. 'China plus one' strategies are accelerating, and the US remains structurally misaligned with low-cost production hubs. Tariffs aimed at reshoring supply chains are unlikely to deliver sustained gains unless accompanied by deep supply-side reforms, and risk further disincentivizing foreign direct investment if global firms perceive US trade policy as erratic or punitive.

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Financial markets found a measure of calm this week, buoyed by some subtle shifts in tone from US policymakers. A softening in the administration’s rhetoric around trade tariffs coupled with a less confrontational stance toward Federal Reserve Chair Jerome Powell, helped ease tensions that had roiled markets earlier in the month. Equities rebounded modestly, and volatility indicators edged lower, reflecting cautious optimism that the worst of the policy shocks may be behind us. But beneath the surface, significant downside risks persist. New shipping data point to a pronounced slowdown in US-China trade flows (chart 1), suggesting the damage from recent tariff escalations is already rippling through global supply chains. Meanwhile, incoming data for the US revealed an unexpected contraction in the economy in Q1 and further signs of weakness in the labour market (chart 2). The US dollar, in the meantime, while long supported by superior growth and yield differentials, has begun to decouple from traditional drivers (charts 3 and 4) suggesting growing pressure on capital flows. At the same time, structural imbalances are drawing renewed scrutiny: unit labour cost comparisons show the US steadily losing competitiveness (chart 5), while nominal wage disparities remain stark versus China and other Asian economies, further complicating any effort to restore trade balance without broader reforms (chart 6). In short, while markets may be drawing temporary comfort from a pause in tariff brinkmanship, the deeper economic and financial vulnerabilities exposed this month remain unresolved—and increasingly central to the global macro narrative.

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Charts of the Week: Tariff Truce, Tenuous Trust

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U.S. light vehicle sales dropped 2.9% (+6.5% y/y) to 17.31 million units (SAAR) in April after surging 10.8% to 17.82 million units in March. The retreat in April vehicle sales accompanied a 1.7% y/y rise in real disposable income through March, which compared to 2.0% growth last year.

Sales declines were broad-based last month. Light truck sales fell 1.3% (+9.9% y/y) during April to 14.34 million units (SAAR), after rising 12.4% in March. Purchases of domestically-made light trucks declined 1.2% (+11.9% y/y) to 11.02 million units, after jumping 12.5% in March. Sales of imported light trucks fell 1.8% (+4.4% y/y) to 3.32 million units, following an 11.6% March surge.

Trucks’ record 82.8% share of the light vehicle market last month compared to 81.5% in March and 80.3% in April of last year. The share averaged 80.3% during all of 2024 versus 53.3% ten years earlier.

Auto sales also declined last month, down 9.5% (-7.5%) to 2.97 million units (SAAR) following a 3.5% March rise. The decline reversed all of the increase over the prior two months. Purchases of domestically-produced cars fell 9.8% (-4.3% y/y) last month to 2.22 million units, after rising 3.8% in March. Sales of imported autos declined 9.6% (-15.7% y/y) to 0.75 million units, following a 2.5% March increase.

Imports' 23.5% share of the U.S. light vehicle market was little changed from 23.6% in March and compared to a May 2023 low of 22.9% and a high of 26.3% in November of 2023. Imports' share of the passenger car market held steady at 25.3% last month and compared to 27.7% in April of last year. It reached a high of 38.7% in September 2021. Imports' share of the light truck market eased to 23.2% last month after falling to 23.3% in March.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the I**NDUSTRY** database.

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- Light truck sales pull back, while auto sales tumble.
- Both domestic and imported sales decline.
- Imports' market share slips further.

Economy in Brief: June 2010

Jump to:

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